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FORM 10-Q
 
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended December 25, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from __________ to __________
 Commission file number 1-7872
 
 TRANSTECHNOLOGY CORPORATION
  Delaware
(State or other jurisdiction of
incorporation or organization)
700 Liberty Avenue
Union, New Jersey
(Address of principal executive offices)
    
    95-4062211
(I.R.S. employer
identification no.)
07083
(Zip Code)
   þ o
  o o o
  o þ




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INDEX
 Page No.PART I.
    
    Financial InformationItem 1.
    
    Financial Statements
    
    
    3Statements of Consolidated Operations Three and Nine
Month Periods Ended December 25, 2005
and December 26, 2004
    
    
    4Consolidated Balance Sheets
December 25, 2005 and March 31, 2005
    
    
    5Statements of Consolidated Cash Flows
Nine Month Periods December 25, 2005 and
December 26, 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-12Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12-20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21PART II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    22Item 4.
    
    Submission of Matter to a Vote of Security Holders
    
    
    22Item 6.
    
    Exhibits
    
    
    22SIGNATURES
    
    
    
    
    23EX-3.1: CERTIFICATE OF INCORPORATIONEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
 2




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PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
   3




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TRANSTECHNOLOGY CORPORATION
 
 STATEMENTS OF CONSOLIDATED OPERATIONS
 (UNAUDITED)
  Three Months Ended
    
    
    Nine Months EndedDecember 25, 2005
    
    
    December 26, 2004
    
    
    December 25, 2005
    
    
    December 26, 2004Net sales
    
    $
    16,315
    
    
    $
    17,267
    
    
    $
    42,294
    
    
    $
    47,064Cost of sales
    
    
    9,562
    
    
    
    10,049
    
    
    
    24,458
    
    
    
    27,810Gross profit
    
    
    6,753
    
    
    
    7,218
    
    
    
    17,836
    
    
    
    19,254General, administrative
and selling expenses
    
    
    3,616
    
    
    
    4,411
    
    
    
    10,002
    
    
    
    12,635Interest expense
    
    
    2,444
    
    
    
    2,462
    
    
    
    7,000
    
    
    
    8,143Other expense-net
    
    
    69
    
    
    
    85
    
    
    
    50
    
    
    
    16Loss on extinguishment of debt
    
    
    
    
    
    
    2,185
    
    
    
    
    
    
    
    2,185Income (loss) before income taxes
    
    
    624
    
    
    
    (1,925
    )
    
    
    784
    
    
    
    (3,725
    )Provision (benefit) for income taxes
    
    
    237
    
    
    
    (657
    )
    
    
    298
    
    
    
    (1,341
    )Net income (loss)
    
    $
    387
    
    
    $
    (1,268
    )
    
    $
    486
    
    
    $
    (2,384
    )Basic earnings (loss) per share:Net income (loss)
    
    $
    0.06
    
    
    $
    (0.19
    )
    
    $
    0.07
    
    
    $
    (0.36
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    0.06
    
    
    $
    (0.19
    )
    
    $
    0.07
    
    
    $
    (0.36
    )Number of shares used in computation
of 
per share information: (Note 1)Basic
    
    
    6,726,000
    
    
    
    6,701,000
    
    
    
    6,706,000
    
    
    
    6,684,000Diluted
    
    
    6,760,000
    
    
    
    6,701,000
    
    
    
    6,734,000
    
    
    
    6,684,000
  4




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TRANSTECHNOLOGY CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
  (Unaudited)December 25, 2005
    
    
    March 31, 2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    207
    
    
    $
    1,039Accounts
receivable (net of allowance for doubtful accounts
of $19 at December 25, 2005 and $16 at March 31, 2005)
    
    
    11,375
    
    
    
    9,782Inventories  net
    
    
    18,059
    
    
    
    15,897Prepaid expenses and other current assets
    
    
    968
    
    
    
    873Income tax receivable
    
    
    
    
    
    
    954Deferred income taxes
    
    
    2,050
    
    
    
    2,050Total current assets
    
    
    32,659
    
    
    
    30,595Property, plant and equipment
    
    
    16,459
    
    
    
    15,515Less accumulated depreciation
    
    
    11,501
    
    
    
    11,023Property,
plant and equipmentnet
    
    
    4,958
    
    
    
    4,492Other assets:Deferred income taxes
    
    
    28,802
    
    
    
    29,100Other
    
    
    11,504
    
    
    
    12,251Total other assets
    
    
    40,306
    
    
    
    41,351Total
    
    $
    77,923
    
    
    $
    76,438Liabilities and Stockholders DeficitCurrent liabilities:Revolving credit facility
    
    $
    79
    
    
    $
    386Current portion of long-term debt
    
    
    3,079
    
    
    
    3,079Accounts payable-trade
    
    
    7,358
    
    
    
    3,768Accrued compensation
    
    
    2,414
    
    
    
    2,270Accrued income taxes
    
    
    469
    
    
    
    652Accrued interest
    
    
    735
    
    
    
    781Other current liabilities
    
    
    3,560
    
    
    
    3,303Total current liabilities
    
    
    17,694
    
    
    
    14,239Long-term debt payable to banks and others
    
    
    56,257
    
    
    
    57,868Other long-term liabilities
    
    
    9,706
    
    
    
    10,690Contingencies (Note 8)Stockholders deficit:Preferred stock    authorized, 300,000 shares; none issued
    
    
    
    
    
    
    Common stock    authorized, 14,700,000 shares of $.01 par value;
issued 7,115,853 and 7,087,211 at December 25, 2005 and March
31, 2005, respectively
    
    
    71
    
    
    
    71Additional paid-in capital
    
    
    74,337
    
    
    
    74,136Accumulated deficit
    
    
    (73,539
    )
    
    
    (74,025
    )Unearned compensation
    
    
    (176
    )
    
    
    (114
    )693
    
    
    
    68Less treasury stock, at cost - 390,135 shares at December 25, 2005
and at March 31, 2005
    
    
    (6,427
    )
    
    
    (6,427
    )Total stockholders deficit
    
    
    (5,734
    )
    
    
    (6,359
    )Total
    
    $
    77,923
    
    
    $
    76,438
  5




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TRANSTECHNOLOGY CORPORATION
 
 STATEMENTS OF CONSOLIDATED CASH FLOWS
 (UNAUDITED)
  Nine Months EndedDecember 25, 2005
    
    
    December 26, 2004Cash Flows from Operating Activities:Net income (loss)
    
    $
    486
    
    
    $
    (2,384
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Write off of unamortized loan fees
    
    
    
    
    
    
    1,438Depreciation and amortization
    
    
    1,080
    
    
    
    1,162Noncash interest expense, net
    
    
    794
    
    
    
    2,510Increase in provision for bad debt
    
    
    3
    
    
    
    12Changes in assets and liabilities:Increase in accounts receivable and other receivables
    
    
    (642
    )
    
    
    (2,125
    )(Increase) decrease in inventories
    
    
    (2,162
    )
    
    
    4,701Decrease (increase) in deferred taxes
    
    
    298
    
    
    
    (1,192
    )Decrease (increase) in other assets
    
    
    16
    
    
    
    (223
    )Increase (decrease) in accounts payable
    
    
    3,877
    
    
    
    (1,268
    )Increase (decrease) in accrued compensation
    
    
    144
    
    
    
    (1,261
    )Decrease in income taxes payable
    
    
    (183
    )
    
    
    (489
    )Decrease in other liabilities
    
    
    (913
    )
    
    
    (2,238
    )Net cash provided by used in operating activities
    
    
    2,798
    
    
    
    (1,357
    )Cash Flows from Investing Activities:Additions to property, plant and equipment
    
    
    (1,231
    )
    
    
    (1,636
    )Proceeds from sale of real estate
    
    
    
    
    
    
    1,331Collection of notes receivable
    
    
    133
    
    
    
    25Decrease in restricted cash-net
    
    
    4
    
    
    
    49Net cash (used in) investing activities
    
    
    (1,094
    )
    
    
    (231
    )Cash Flows from Financing Activities:Borrowings (repayments) on long-term debt
    
    
    (2,250
    )
    
    
    61,250(Repayments) borrowings of other debt
    
    
    (307
    )
    
    
    (58,420
    )Payment of debt issue costs
    
    
    
    
    
    
    (2,070
    )Exercise of stock options
    
    
    21
    
    
    
    21Net cash (used in) provided by financing activities
    
    
    (2,536
    )
    
    
    781Decrease in cash and cash equivalents
    
    
    (832
    )
    
    
    (807
    )Cash and cash equivalents at beginning of period
    
    
    1,039
    
    
    
    960Cash and cash equivalents at end of period
    
    $
    207
    
    
    $
    153Supplemental information:Interest payments
    
    
    6,271
    
    
    
    6,109Income tax payments
    
    
    184
    
    
    
    341Increase in term loans and senior subordinated note for paid-in-kind
interest expense
    
    
    639
    
    
    
    2,370Non-cash investing activity for addtions to property, plant and equipment
    
    
    182
    
    
    
    172
  6




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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Earnings (Loss) Per Share
 
  Three Months Ended
    
    
    Nine Months EndedDecember 25,
    
    
    December 26,
    
    
    December 25,
    
    
    December 26,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic Earnings
(Loss) per Common
Share:Weighted-average
common stock
outstanding for
basic earnings
(loss) per share
calculation
    
    
    6,726
    
    
    
    6,701
    
    
    
    6,706
    
    
    
    6,684Diluted Earnings
(Loss) per Common
Share:Weighted-average
common shares
outstanding
    
    
    6,726
    
    
    
    6,701
    
    
    
    6,706
    
    
    
    6,684Stock options and
warrants*
    
    
    34
    
    
    
    
    
    
    
    28
    
    
    
    Weighted-average
common stock
outstanding for
diluted earnings
(loss) per share
calculation
    
    
    6,760
    
    
    
    6,701
    
    
    
    6,734
    
    
    
    6,684
  *
    
    Excludes anti-dilutive stock options totaling 193,500 and 241,167 for the three and nine
month periods ended December 25, 2005, respectively, and 193,500 and 198,850 for the three
and nine month periods ended December 26, 2004 respectively.
 Stock-Based Compensation
  7




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Three Months Ended
    
    
    Nine Months EndedDecember 25,
    
    
    December 26,
    
    
    December 25,
    
    
    December 26,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) as reported
    
    $
    387
    
    
    $
    (1,268
    )
    
    $
    486
    
    
    $
    (2,384
    )Add: Stock-based employee
compensation expense included in
reported net income (loss), net
of related tax effects
    
    
    24
    
    
    
    36
    
    
    
    62
    
    
    
    93Deduct: Total stock-based
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    (59
    )
    
    
    (79
    )
    
    
    (172
    )
    
    
    (199
    )Proforma net income (loss)
    
    $
    352
    
    
    $
    (1,311
    )
    
    $
    376
    
    
    $
    (2,490
    )Basic earnings (loss) per share:As reported
    
    
    0.06
    
    
    
    (0.19
    )
    
    
    0.07
    
    
    
    (0.36
    )Proforma
    
    
    0.05
    
    
    
    (0.20
    )
    
    
    0.06
    
    
    
    (0.37
    )Diluted earnings (loss) per share:As reported
    
    
    0.06
    
    
    
    (0.19
    )
    
    
    0.07
    
    
    
    (0.36
    )Proforma
    
    
    0.05
    
    
    
    (0.20
    )
    
    
    0.06
    
    
    
    (0.37
    )
 Inventories
  December 25, 2005
    
    
    March 31, 2005Finished goods
    
    $
    
    
    
    $
    Work in process
    
    
    5,866
    
    
    
    4,120Purchased and
manufactured parts
    
    
    12,193
    
    
    
    11,777Total
    
    $
    18,059
    
    
    $
    15,897
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Long-term Debt Payable to Banks and Others
  December 25, 2005
    
    
    March 31, 2005Senior Credit Facility
    
    $
    59,336
    
    
    $
    61,254Other
    
    
    79
    
    
    
    7959,415
    
    
    
    61,333Less current maturities
    
    
    3,158
    
    
    
    3,465Total long-term debt
    
    $
    56,257
    
    
    $
    57,868
 Senior Credit Facility 
 Former Senior Credit Facility
 Senior Subordinated Notes
  9




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Employee Benefit Plans
    Postretirement BenefitsThree Months Ended
    
    
    Nine Months EndedDecember 25, 2005
    
    
    December 26, 2004
    
    
    December 25, 2005
    
    
    December 26, 2004Components of net
periodic benefit costs:Interest Cost
    
    $
    18
    
    
    $
    18
    
    
    $
    55
    
    
    $
    54Amortization of net loss
    
    
    14
    
    
    
    17
    
    
    
    40
    
    
    
    53Net periodic benefit
cost
    
    $
    32
    
    
    $
    35
    
    
    $
    95
    
    
    $
    107
 Pension PlanThree Months Ended
    
    
    Nine Months EndedDecember 25, 2005
    
    
    December 26, 2004
    
    
    December 25, 2005
    
    
    December 26, 2004Components of net
periodic benefit
costs:Interest Cost
    
    $
    38
    
    
    $
    26
    
    
    $
    121
    
    
    $
    164Amortization of net
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic
benefit cost
    
    $
    38
    
    
    $
    26
    
    
    $
    121
    
    
    $
    164
 10




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New Accounting Standards
      Statement of Cash Flows
  11




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Contingencies
    
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
  12




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Results of Operations
 Three Months Ended December 25, 2005 Compared with Three Months Ended December 26, 2004
 Net Sales.
 Gross Profit
 General, administrative and selling expenses
 Interest expense.
 13




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Net Income
 New orders
 Backlog.
 Nine Months Ended December 25, 2005 Compared with Nine Months Ended December 26, 2004
 Net Sales.
 Gross Profit.
 General, administrative and selling expenses
 14




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Interest expense
 Net Income
 New orders
 Backlog.
 Liquidity and Capital Resources
   15




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Working Capital
   Capital Expenditures
  Senior Credit Facility
  16




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Tax Benefits from Net Operating Losses
  Summary Disclosure About Contractual Obligations and Commercial Commitments
  
 2010 and(Dollars in thousands)
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    thereafter
    
    
    TotalLong-term debt
    
    $
    829
    
    
    $
    3,000
    
    
    $
    3,000
    
    
    $
    52,507
    
    
    $
    
    
    
    $
    59,336Operating leases
    
    
    79
    
    
    
    173
    
    
    
    42
    
    
    
    17
    
    
    
    16
    
    
    
    327Total
    
    $
    908
    
    
    $
    3,173
    
    
    $
    3,042
    
    
    $
    52,524
    
    
    $
    16
    
    
    $
    59,663
   17




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Inflation
  Environmental Matters
     18




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Litigation
  Forward Looking Statements
     19




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Recently Issued Accounting Standards
     (
 20




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4 Controls and Procedures
    21




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
   FOR
    
    WITHHELDMichael J. Berthelot
    
    
    6,181,238
    
    
    
    213,120Thomas V. Chema
    
    
    6,300,351
    
    
    
    94,007Jan Naylor Cope
    
    
    6,298,082
    
    
    
    96,276John H. Dalton
    
    
    6,313,337
    
    
    
    81,021Gail F. Lieberman
    
    
    6,313,351
    
    
    
    81,007William J. Recker
    
    
    6,284,964
    
    
    
    109,394Robert L.G. White
    
    
    6,300,051
    
    
    
    94,307
 
 Item 6. Exhibits
 3.1
    
    Certificate of Incorporation of the Company, as amended.31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 22




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SIGNATURES
  
 Dated: February 7, 2006
    
    By:
    
    /s/ Joseph F. SpanierJoseph F. Spanier, Vice President,Chief Financial Officer and Treasurer *
   23